Most people do feel that investment is important to improve ones financial position, yet still many people do not invest their money. There are two main reasons for this:
- People do not have sufficient funds for investment
- People do not know how to invest. They want to invest but have no knowledge of investing so refrain from it.
How to people who fit in the second category (they want to invest but just don't know how) start investing?
The basic rule is that if you only have a small amount of money to invest, then you should seek the safer forms of investment such as fixed deposits / CDs in banks, IRAs and so on. IRAs are retirement investment plans. CDs are deposits that are set aside by the bank for a fixed period of time and earn interest during that period. These are good and safe investments for a long or medium term goal.
Most people move to stock market investing after gaining some experience in the investment field. This is also good for people who have larger amounts available for investment. It is usually a good idea to divide your investment plan into categories based on the risk factor. This means that you have a percentage of your investments in CDs, another percentage in bonds, another percentage in stocks and so on. Remember that with higher risk comes higher returns. So based on your personal circumstances and risk taking ability, you should decide how much to invest in each category.
In general for stocks, it is a good idea to go for long term investment. Markets do go up and down. There is no point in getting nervous or excited with each downward or upward spike. If the company whose stock you have is doing well, then over a long period of time you will definitely gain.
As a final note I will advice that when you start out in investing, do contact a reliable investment or stock agent for advice. Most banks today provide these services for free for their account holders.
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